Appeals Court Grills Microsoft, DOJ

The first day of oral arguments in the Microsoft antitrust case, being heard by the full bench of the U.S. Court of Appeals here, was not a good one for the Department of Justice and the various states.

The first day of oral arguments in the Microsoft antitrust case, being heard by the full bench of the U.S. Court of Appeals here, was not a good one for the Department of Justice and the various states.
Chief Judge Harry Edwards surprised many legal observers Monday afternoon when he bluntly stated that some of District Judge Thomas Penfield Jacksons findings of fact were conclusory and that he could find no evidence to support them.

The afternoon session was examining the District Courts finding that Microsoft had illegally tied its Internet Explorer Web browser to its monopoly Windows operating system.

Edwards was specifically referring to the lack of data about whether there was significant consumer demand for a browserless operating system.
"The findings of fact fail to point to any real data to back up the assertion that there was demand for a browserless operating system. I do not feel that I have to accept findings of fact that are not backed up," he told John Roberts, who was arguing the case for the 18 states and the District of Columbia.
However, Roberts argued that the fact Microsoft "forced" its OEM partners to bundle and ship Windows and IE together raised the issue of a tie. While the combination of the two products was "fine," refusing to allow the OEMs to remove IE from the Windows operating system, despite customer requests to do so, was the problem.
"Microsoft foreclosed Netscapes access to the OEM channel. It has a legal obligation not to tie separate products as a way of forcing Netscape out of the OEM channel. ... The products should be able to compete fairly on their merit," he said.
Longtime Microsoft attorney Richard Urowsky of the firm Sullivan & Cromwell contended that the operating system and browser were fully integrated and therefore not tied together.
Bill Kovacic, an antitrust expert and Professor of Law at George Washington University in Washington, said Judge Edwards statements about some findings of fact not being supported was an "invitation" to Microsoft to identify those findings that it felt were baseless and to contradict the evidence around this.
"But it must be remembered that the government won a huge victory in the District Court and has a lot of ground to defend. As such, it was inevitable that the government would receive the hardest and most probing questions," he said.
Judge Edwards also questioned Roberts about whether it could be reasonably argued that there was a separate browser market. "This seems highly unlikely as all operating systems include a browser," he contended.
The justices also asked numerous questions about what standard should be used to determine whether Windows and IE were separate products or had been tied together. This issue was addressed in a 1998 Microsoft case before this same court, and a Consent Decree was issued in this regard.
Kovacic said that decree had adopted a standard that did not aggressively intervene in corporate decisions that showed benefits for consumers. Microsoft is pushing for this standard to be applied to this case, rather than the more rigorous standard applied by the Supreme Court.
"Justices Ginsburg, Randolph and Williams appear to agree that their previous decree was, and still is, correct. As such, they are likely to coalesce around the position they adopted in the previous 1998 Consent Decree," he said.
Monopoly maintenance
Earlier in the day, Judge David Sentelle also bluntly told both parties that their briefs appeared to have been written for a jury rather than the Appellate Court, which generally deferred to findings of fact from the District Court.
Justices Sentelle and Edwards also aggressively questioned Jeffrey Minear of the U.S. solicitor generals office, who was arguing for the government in the morning session, about the link between Microsofts alleged monopolistic and predatory behavior and the supposed negative effects this had had on consumers and the operating system market.
The morning session dealt with the issue of monopoly maintenance -- essentially, whether Microsoft engaged in a series of acts against rivals meant to protect its monopoly in the PC operating systems market.
Edwards also peppered Minear with questions about whether the alleged Microsoft monopoly would simply be replaced by a Sun Microsystems Inc., Netscape and Java middleware monopoly.
"Are we talking about moving from one monopoly to another here?" Edwards asked. "You are running away from answering this question. Where is the evidence that Netscape was on the road to producing APIs so as to get developers to write applications for it that would threaten Windows?
"I cannot find anything that says Netscape has an interest in, or the capacity to serve in, the middleware market. If it is not intending to enter this market and compete with Microsoft as an operating system, I dont see how it is a threat. What does this show us on causation?"
However, Minear maintained the governments stance that Microsoft used its monopoly power to restrict competition and took extraordinary steps and spent a great deal of money to prevent consumers from access to Netscape Navigator and Java Technologies.
It had done this by not allowing its OEM partners to remove the IE icon from Windows and by developing a Java-based toolkit that was "misleading and did not allow applications to be ported from one platform to another when a native call needed to be made."
But Judge Edwards was relentless, asking Minear whether he was not "simply fighting for the newest, latest monopoly" since either IE or Netscape would have ultimately been dominant on the desktop. Judge Ginsburg agreed, saying a "single, ubiquitous winner" would have had to emerge from this competition.
Judge Williams also asked Minear to define exactly what types of competition were permissible and where the line had to be drawn with regard to competitive behaviour.
A number of the justices also repeatedly asked for clarification about how consumers were negatively affected by Microsofts alleged monopolistic and harmful practices in this area.
GUs Kovacic said it was becoming clear that Justices Williams, Andrews and Ginsburg were doubting some of the key aspects of the governments case. "What I expect to emerge is a set of results that are not broad-based enough to support the magnitude of Judge Jacksons remedy package," Kovacic said.
The remedy, or relief, is one of three topics set to be argued before the seven justices Tuesday. Both parties will debate whether the company should be broken into two, as proposed by Judge Jackson. The issue of Microsofts attempted monopolization of the market for Web browsers will also fall under the spotlight, as will the conduct of the trial and the extrajudicial statements made by Jackson to newspapers, magazines, book authors and a radio interviewer.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at www.eweek.com.